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School finance, spatial income segregation, and the nature of communities

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  • Nechyba, Thomas

Abstract

While the issue of school finance has been studied extensively, relatively little effort has been devoted to understanding how school finance policies impact the nature of communities. This is peculiar in light of substantial evidence that public school quality, at least in the U.S., has much to do with residential choices by households, and in light of increasing empirical evidence that residential segregation perpetuates income inequality. In this paper, I emphasize in particular the importance of considering not only the level of government that is funding public schools but also the role played by the private sector as well as its interaction with the existing public school system. Somewhat surprisingly, simulation results based on U.S. data suggest that, in terms of producing spatial income segregation, the role of centralization versus decentralization of public school financing is quite secondary to the role played by the private sector. A purely public school system, regardless of the degree of centralization of school finance, results in substantially more spatial segregation than a purely private system. However, it is the combination of a (centralized or decentralized) public system with a private school market that yields the least residential segregation as housing price distortions from the capitalization of the public system generate incentives for middle and high income private school attendees to live with lower income public school attendees. Motivated by this insight, additional simulations involving explicit government support for private schools in the form of vouchers are reported, and the sensitivity of results to alternative school production models is tested.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Urban Economics.

Volume (Year): 54 (2003)
Issue (Month): 1 (July)
Pages: 61-88

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Handle: RePEc:eee:juecon:v:54:y:2003:i:1:p:61-88

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Web page: http://www.elsevier.com/locate/inca/622905

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References

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  1. Westhoff, Frank, 1977. "Existence of equilibria in economies with a local public good," Journal of Economic Theory, Elsevier, vol. 14(1), pages 84-112, February.
  2. Cutler, David M & Glaeser, Edward L, 1997. "Are Ghettos Good or Bad?," The Quarterly Journal of Economics, MIT Press, vol. 112(3), pages 827-72, August.
  3. Thomas J. Nechyba, 2001. "Centralization, Fiscal Federalism and Private School Attendance," NBER Working Papers 8355, National Bureau of Economic Research, Inc.
  4. Lawrence Katz & B. Jeffrey Liebman, 2000. "Moving to Opportunity in Boston: Early Results of a Randomized Mobility Experiment," Working Papers 820, Princeton University, Department of Economics, Industrial Relations Section..
  5. Rose-Ackerman, Susan, 1979. "Market models of local government: Exit, voting, and the land market," Journal of Urban Economics, Elsevier, vol. 6(3), pages 319-337, July.
  6. Epple, Dennis & Filimon, Radu & Romer, Thomas, 1993. "Existence of voting and housing equilibrium in a system of communities with property taxes," Regional Science and Urban Economics, Elsevier, vol. 23(5), pages 585-610, November.
  7. George J. Borjas, 1994. "Ethnicity, Neighborhoods, and Human Capital Externalities," NBER Working Papers 4912, National Bureau of Economic Research, Inc.
  8. Benabou, Roland, 1996. "Heterogeneity, Stratification, and Growth: Macroeconomic Implications of Community Structure and School Finance," American Economic Review, American Economic Association, vol. 86(3), pages 584-609, June.
  9. Epple, Dennis & Romano, Richard E, 1998. "Competition between Private and Public Schools, Vouchers, and Peer-Group Effects," American Economic Review, American Economic Association, vol. 88(1), pages 33-62, March.
  10. Zimmerman, David J, 1992. "Regression toward Mediocrity in Economic Stature," American Economic Review, American Economic Association, vol. 82(3), pages 409-29, June.
  11. Solon, Gary, 1992. "Intergenerational Income Mobility in the United States," American Economic Review, American Economic Association, vol. 82(3), pages 393-408, June.
  12. Nechyba, Thomas J, 1997. "Local Property and State Income Taxes: The Role of Interjurisdictional Competition and Collusion," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 351-84, April.
  13. Thomas J. Nechyba, 2000. "Mobility, Targeting, and Private-School Vouchers," American Economic Review, American Economic Association, vol. 90(1), pages 130-146, March.
  14. Epple, Dennis & Platt, Glenn J., 1998. "Equilibrium and Local Redistribution in an Urban Economy when Households Differ in both Preferences and Incomes," Journal of Urban Economics, Elsevier, vol. 43(1), pages 23-51, January.
  15. Dennis Epple & Holger Sieg, 1999. "Estimating Equilibrium Models of Local Jurisdictions," Journal of Political Economy, University of Chicago Press, vol. 107(4), pages 645-681, August.
  16. Susanna Loeb & Marianne E. Page, 2000. "Examining The Link Between Teacher Wages And Student Outcomes: The Importance Of Alternative Labor Market Opportunities And Non-Pecuniary Variation," The Review of Economics and Statistics, MIT Press, vol. 82(3), pages 393-408, August.
  17. Stiglitz, J. E., 1974. "The demand for education in public and private school systems," Journal of Public Economics, Elsevier, vol. 3(4), pages 349-385, November.
  18. Benabou, Roland, 1996. "Equity and Efficiency in Human Capital Investment: The Local Connection," Review of Economic Studies, Wiley Blackwell, vol. 63(2), pages 237-64, April.
  19. Fernandez, Raquel & Rogerson, Richard, 1996. "Income Distribution, Communities, and the Quality of Public Education," The Quarterly Journal of Economics, MIT Press, vol. 111(1), pages 135-64, February.
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Citations

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Cited by:
  1. Quigley, John M., 2008. "Local Public Finance," Berkeley Program on Housing and Urban Policy, Working Paper Series qt3z67z3p0, Berkeley Program on Housing and Urban Policy.
  2. Rainald Borck, 2006. "Central versus Local Education Finance: A Political Economy Approach," Discussion Papers of DIW Berlin 565, DIW Berlin, German Institute for Economic Research.
  3. Leonid V. Azarnert, 2011. "Integrated Public Education, Fertility and Human Capita," Working Papers 2011-24, Department of Economics, Bar-Ilan University.
  4. repec:mab:wpaper:23 is not listed on IDEAS
  5. Berardino Cesi, 2009. "Local public education and childless voting : the arising of an "ends with the middle" coalition," THEMA Working Papers 2009-07, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  6. Gibbons, Steve & Machin, Stephen & Silva, Olmo, 2006. "Choice, Competition and Pupil Achievement," IZA Discussion Papers 2214, Institute for the Study of Labor (IZA).
  7. Thomas J. Nechyba, 2006. "Alternative education finance strategies," Regional Economic Development, Federal Reserve Bank of St. Louis, issue Mar, pages 7-27.
  8. William Clark & Regan Maas, 2012. "Schools, Neighborhoods and Selection: Outcomes Across Metropolitan Los Angeles," Population Research and Policy Review, Springer, vol. 31(3), pages 339-360, June.
  9. Thomas Nechyba, 2004. "School Choice and School Quality in the US," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 2(4), pages 33-38, 01.
  10. De Fraja, Gianni & Martínez-Mora, Francisco, 2014. "The desegregating effect of school tracking," Journal of Urban Economics, Elsevier, vol. 80(C), pages 164-177.
  11. Leonid V. Azarnert, 2008. "Involuntary Integration in Public Education, Fertility and Human Capital," Working Papers 2008-07, Department of Economics, Bar-Ilan University.
  12. Machin, Stephen, 2011. "Houses and schools: Valuation of school quality through the housing market," Labour Economics, Elsevier, vol. 18(6), pages 723-729.
  13. Nguyen-Hoang, Phuong & Yinger, John, 2011. "The capitalization of school quality into house values: A review," Journal of Housing Economics, Elsevier, vol. 20(1), pages 30-48, March.
  14. Cohen-Zada, Danny & Justman, Moshe, 2005. "The religious factor in private education," Journal of Urban Economics, Elsevier, vol. 57(3), pages 391-418, May.
  15. Luis Fernando Gamboa & Mauricio Rodríguez-Acosta & Andrés Felipe García-Suaza, 2010. "Academic achievement in sciences: the role of preferences and educative assets," DOCUMENTOS DE TRABAJO 006701, UNIVERSIDAD DEL ROSARIO.
  16. Brunner, Eric J. & Cho, Sung-Woo & Reback, Randall, 2012. "Mobility, housing markets, and schools: Estimating the effects of inter-district choice programs," Journal of Public Economics, Elsevier, vol. 96(7), pages 604-614.
  17. Louafi Bouzouina & Dominique Mignot, 2005. "Disparités de revenus à différentes échelles spatiales en France de 1985 à 2001," Post-Print halshs-00108437, HAL.

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